BEIJING, China: DeepSeek could be valued at up to US$50 billion in its first external fundraising round, as the company moves away from its long-standing strategy of avoiding outside investment, sources said.

The startup is looking to raise between $3 billion and $4 billion to expand computing capacity and improve employee benefits, according to people familiar with the matter.

China's state-backed 60-billion-yuan ($8.8 billion) national artificial intelligence fund is in talks to act as a lead investor, one source said. The fund is backed by the China Integrated Circuit Industry Investment Fund, which declined to comment.

Tencent Holdings has also held discussions about investing in DeepSeek, sources added, though the company declined to comment. DeepSeek itself did not immediately respond to queries.

The potential fundraising comes as DeepSeek faces intensifying competition in China's fast-moving AI sector. Rivals backed by major tech firms, including ByteDance and Alibaba, as well as startups like MiniMax and Moonshot AI have raised billions to accelerate development.

DeepSeek was founded by Liang Wenfeng, who has historically preferred to run the company like a research lab, funding it through his hedge fund High-Flyer rather than relying on external capital or public markets. He is directly involved in the current fundraising discussions, sources said.

The company has also seen talent departures, including researcher Luo Fuli, who left to lead Xiaomi's AI model team.

DeepSeek gained global attention last year with low-cost, open-source chatbot models such as V3 and R1, but the industry has since shifted toward more advanced AI "agents" capable of handling complex tasks with less human input; systems that require far greater computing power.

The company said last month its next-generation V4 model "redefined the state-of-the-art" for open-source AI. However, third-party evaluations suggest it still trails leading models from U.S. and Chinese competitors.